News & opinion

16 AUG 2019

What if: blockchain took over property transactions?

Using a distributed ledger will make real estate deals more secure and more streamlined, argues Dr Bob Duncan.

Blockchain allows us to create an extremely robust new form of database. It makes a multiplicity of copies of the audit trail for each transaction, so that you can know whether the information is correct because each copy checks all of the others. With so many copies it is computationally far too expensive for an attacker to hack more than half the nodes – the threshold at which consensus is reached on whether the data is correct – making the system far more secure than a conventional database.

The fundamental strength of blockchain is that it is totally transparent. A hacker could modify traditional records to falsely show that they are the new owner of a property, but with a distributed ledger you can't change the fundamental record; you can only add a note to the audit trail saying, for example: "We became the new owner by transferring money on this date." There is clear provenance on all that has transpired in a transaction, from its inception right up until the current point in time.

Land registries around the world are examining how blockchain can be used to carry out the basic elements of a property transaction more efficiently and cheaply. If governments take the lead, and issues around privacy and security are resolved, the technology has the potential within the next five years to yield huge savings in the time and cost of administration associated with buying and selling property.

Surveyors and lawyers will no longer need to pay someone to check records or dig through dusty tomes; they will be able to get an instant report on a property knowing that it will be 100% accurate. Meanwhile, greater transparency will make it easier to get up-to-date information on what is happening in property markets, thereby improving the quality of analysis that real estate professionals provide.

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Surveyors will no longer need to pay someone to check records or dig through dusty tomes.

Once a streamlined blockchain-based land registry is in place, the opportunity to trade tokenised real estate securities will follow, opening up the property investment market for smaller investors. That could take five to 10 years, but there are factors that might slow progress: secure trading applications will need to be developed, regulators will pay increasing attention to the area, and you need a critical mass of interested buyers and sellers.

Distributed ledger won't put surveyors out of business, they will just be doing different things – sometimes much more efficiently – allowing them to take on more business and improve profitability. By using technology to do things quickly and cheaply you can serve far more customers.

Dr Bob Duncan is a lecturer in accounting and data technology at the University of Aberdeen

This article originally appeared in the Precision issue of Modus (Jul-Aug 2019). The opinions expressed here are those of the author and do not necessarily represent the views of RICS.